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Despite high natural gas prices, which in turn encouraged "very high" levels of drilling, production in Canada last year was flat, growing only 0.5% over 2003, according to Canada's National Energy Board (NEB) in its 2004 Annual Report. The NEB said the numbers reflect the maturing state of exploration within the once prolific Western Canadian Sedimentary Basin.

In total, 674 gas wells were drilled in Canada last year, which set a new record for the second consecutive year. However, because of the "continuing trend of lower initial productivity exhibited by new wells, production remained at 2003 levels," according to the board. Offshore Nova Scotia at Sable Island, NEB noted that gas production last year averaged 400 MMcf/d, a 7% decrease from 2003.

"High natural gas prices kept the focus on drilling for natural gas through 2004, with gas well completions making up 72% of all wells completed," the 90-page report noted. Oil well completions were only 2% higher than 2003, despite record prices. The proportion of dry wells drilled remained at 6%. Overall, Alberta accounted for 79% of total Canadian gas production, while British Columbia totaled 14%; Saskatchewan, 4%; Nova Scotia, 2%; Northwest Territories and Yukon, 0.5%; and Ontario, less than 0.5%.

On the gas reserves side, NEB reported that reserves replacement only amounted to 46% of gas production in 2004. "Over the past five years, cumulative additions of marketable gas reserves replaced 83% of total gas production. On a regional basis, most areas recorded growth in their initial reserves, particularly Alberta. This was primarily due to a strong exploration effort.

"However, significant decreases in the initial reserves of pools offshore Nova Scotia due to poor reservoir performance resulted in the relatively low production replacement for all of Canada."

The NEB also reported that its oil pipeline infrastructure is being "strained to the limit," and while there is some spare capacity on existing natural gas transportation infrastructure, applications for new gas pipelines to deliver production from new sources continue to be filed.

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